How early retirees insure their health

By Liz Pulliam Weston

Reader response to the two columns I recently wrote on early retirement, "Retired by 50: Real life stories" and "Retired by 50: What it really takes," has been strong and overwhelmingly positive.

But amid all the praise for these folks who shucked their shackles early, many of you had the same query:

"What do they do about health insurance?"

It's a good question. Americans typically can't get Medicare until they're 65. Most employers don't provide health benefits to retirees, particularly those who duck out in their 40s.

Getting insurance on your own, though, can be expensive -- the average annual premium for a family is now more than $12,000. And that's if you can get coverage at all. Most states don't force insurers to cover individuals outside employer or group plans, so even relatively minor health problems can make it hard to get coverage in many states.

Still, going without insurance is risking financial ruin. A single accident or illness can result in six-figure bills and easily wipe out the nest egg you hoped would carry you through retirement.

Stay healthy and take a big deductible

Many of the early retirees I interviewed were fortunate: They're in good health, so they were able to purchase high-deductible insurance policies on their own. This coverage requires them to pay most health-care costs out of pocket, but it protects against catastrophic expenses.

Some combine a high-deductible policy with a health savings account, which allows them to put aside pretax money to pay medical costs. (For more on HSAs, read "Get cheaper medical coverage -- with a tax break").

Fred Ecks and Ann Haebig, of South San Francisco, Calif., each have individual policies with a $4,000 deductible. Ecks, 41, pays $104 a month for coverage that excludes dental coverage while Haebig, 38, pays $131 for a plan that includes dental services.

Both believe in the importance of prevention. They eat organic food and work out regularly. Ecks, who was once 100 pounds overweight, is now an ultramarathon runner. Haebig feels a lot healthier since she switched from full-time to part-time work.

"I'm less stressed generally, which I think also helps," Haebig said.

• Video: How to get claims paid

The Bennett family of Purcellville, Va., has a $10,000 deductible as well as a higher monthly premium: $700. The policy includes maternity benefits, which some high-deductible policies don't, and the coverage came in handy during Mary Bennett's pregnancy with her younger son, now 5, when complications required her hospitalization.

"On the one occasion when we faced a true emergency," said Rob Bennett, 51, "the insurance covered what we couldn't cover on our own."

If your health isn't perfect . . .

The Bolons of Cedar City, Utah, have had a rougher time finding adequate insurance. For the first two years of their early retirement, insurers refused to cover Brad because of a previous bout with cancer.

After Brad had been cancer-free for seven years, the Bolons were able to get a family high-deductible plan -- but the annual premiums are more than $14,000, the deductible is $8,000, and many of Brad's health issues are specifically excluded from coverage.

"We have coverage for the family, with major, gaping holes," said Janine Bolon, adding that the family tries to keep health expenses down by negotiating discounts with providers for paying cash.

Continued: More ways to obtain coverage

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